In collaboration with Endeavor Global and Stanford University, the World Economic Forum recently released a new report, “Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies.” Click here to learn more.
The report, which demonstrates the importance of High-Impact Entrepreneurship in driving economies forward, includes interviews and insights from eight Endeavor Entrepreneur companies: DocSolutions, Globant, MercadoLibre, Petfor, Pharmacy 1, Refinancia, Technisys, and Yola.
In this special series on Endeavor’s blog, we are reprinting the published interviews with each Endeavor firm. Below is the section on Technisys.
Technisys was started in 1996 by three co-founders: Miguel Santos (CEO), Adrian Iglesias (COO) and German Pugliese Bassi (EVP). Its focus was Internet banking products for the financial service industry. After initial traction with major signature clients, the Argentinean crisis in 2002 to 2003 left the founders with a company struggling to survive. Since its resurgence in the same industry and product area in 2004, Technisys has continued on a consistently strong and profitable growth path. In 2001, the founders were selected as Endeavor entrepreneurs.
Miguel Santos is the chief executive officer and co-founder of Technisys. Prior to founding the company, Santos worked for the financial services division of IBM. Santos obtained a BS degree and an MS degree in computer science from the University of Buenos Aires. He has also completed post-graduate work in symmetrical process systems, distributed databases and network computing. In March 2001, Santos was selected as an Endeavor entrepreneur. He has chaired seminars on entrepreneurship at New York University and Stanford University and has made presentations at many banking conferences, including BAI, CLAB, Felaban, Febraban and AMBA.
What was the source of the initial idea, and how did that idea evolve into a viable high-growth business venture? How did it change over time?
Santos: “One of the co-founders, who worked for IBM Argentina, was inspired to think of working in his own company rather than for a large company like IBM. I met him while working on a job for the financial division of IBM. Although we observed IBM suppliers making more money than those working directly for IBM, we did not want to set up a supplier company to IBM. Having decided to set up our own company, we next searched for the target market and chose the financial service sector. This was a big stable market in Argentina, and it had a very good track record of paying bills to its vendors on time. In Argentina, this is a big issue in general and is especially important for start-ups. Many vertical companies in Argentina do not have a good reputation for paying on time.
“Finally we decided on the product. We selected e-banking from two other alternatives we considered because we believed that the Internet would radically transform the way consumers access financial services. And it did. This idea evolved over time. Around 2002, the company started to explore new banking applications for web-based technologies such as branch automation, self-service kiosks, ATMs and web call centres. In 2006, with the introduction of new related architectures such as service-oriented architecture (SOA), the company transformed its product offering into an integrated multi-channel banking suite, which solved quite nicely the channel integration problem. In 2008, while mastering SOA, Technisys entered the core banking arena, starting to develop Cyberbank Core, a new generation, process oriented, multi-channel, multicurrency, multi-bank, fully SOA-based, core banking system.”
What was the initial growth vision or aspiration of the founding team? Was there a sizeable change in this growth vision or aspiration over time? If a change, please describe.
Santos: “We had big aspirations from the start. We didn’t set any limits. We wanted to be Bill Gates or Steve Jobs. At the same time, however, we had little experience in building a company from the start. Our confidence and aspirations were reinforced when Deutsche Bank became our first customer in 1996. We launched a pilot Internet banking project for Deutsche Bank in Argentina, which was one of the earliest e-banking initiatives in Latin America.”
Describe the strategy or business model that enabled your company to achieve its high rate of growth.
Santos: “The company combines the sale of software licenses with related recurrent services to generate a robust income model. Each contract sale produces up to five revenue components, including a one-time license and customization services, a recurrent license maintenance fee, and technical support services. It is also important to note that we’ve decided to grow through geographical expansion versus the option of expanding into other industries, helping us to scale the business better. The next step in a high rate of growth is yet to be seen because the product is reaching critical mass in the market, thus attracting interest from integrators and resellers such as Accenture, Bull, Sonda and TCS. We think this indirect sales model will allow us to scale up revenues dramatically in the coming years.”
What were the major growth accelerators for your company in its high-growth years?
Santos: “Some key growth accelerators in the early days:
1. Our ability to sell things that did not yet exist. We used prototypes to show potential customers what the product might look like.
2. Innovative products. This was a big factor from the very beginning. As industry specialists, we work hard to anticipate demand and fulfill our customers’ needs on time.
3. Early signature customer wins. Our first customer was no less than Deutsche Bank Argentina, which had many benefits because it was a major lighthouse customer. We also benefited greatly from the rigorous due diligence that Deutsche Bank of New York required us to go through as part of the bidding process. We had never done this before, and it gave us much more industrial strength. It was our first encounter with an excellent and demanding client.
4. Exploitation of the company’s successful track record. We did this first with Deutsche Bank and then with major brands like Citibank and HSBC.
5. Our ability to hire really good technical people. We were technical people ourselves, so we had a good sense of who was AAA and who was not. In contrast, we were not as good at hiring business people, and this hurt the company.
6. Becoming an Endeavor entrepreneur. This had a deep impact because it opened our mind to a broader set of opportunities to manage the business and grow. One key area was financing, where we became much more aware of and open to outside investment funding. It was not just reading the Endeavor entrepreneur stories, but also the ability to meet other entrepreneurs and exchange ideas. It was very inspiring for us.”
Briefly describe the financing of your company and how this financing impacted the growth of your company.
Santos: “We were a bootstrapped company until 2007. There was effectively no venture capital market in Argentina, and even if there had been, we likely would not have known about it. We were totally focused on developing products and linking up with customers. We had to grow organically from the living room of one of the founders, with a couple of old PCs, cooking our own lunch each day. During the early years of progress (1999 to 2001), we had some accounts with very good margins, and we built up a cash reserve. This cash proved a great buffer when the crisis hit us in 2002. But then in 2003, we needed to fund the company from our own savings. Not only were we not drawing salaries, but we were putting more of our own money into the company. You can do that for two to three months, but then you wonder whether this is a hole that will keep getting bigger. Luckily, the company had resurgence in 2004 and returned to profitability.”
What were the major challenges your company had to handle in its high-growth years, and how were they managed?
Santos: “These include:
1. Scalability challenges. The major growth challenge for us still is to implement business processes that guarantee that every single person in the company shares the company’s values, vision, objectives and culture. Scalability is the key.
2. Attracting and retaining talented people. We are better at this for technical people than for business people. For technical people, we work on selling their projects and also on constantly motivating them with new challenges and better working conditions. We failed big time on one of our first senior management hires. In 2002, we hired our first commercial manager, who came from a major global tech- nology company. Great resume. He did not understand and did not want to understand our start-up culture. He expected a lot of people to be working for him. In our company, this just does not happen. We expected him to add value, and he did not. We learned that a hiring with a bad outcome cannot only freeze you but set you back.
3. International expansion. Building out the international dimension of Technisys is still in its early days.”
Give examples of dark moments or negative periods that your company or you faced as part of your journey as an executive with this company.
Santos: “Definitely the 2001 to 2003 period associated with the Argentinean crisis, where we almost gave up, was a dark moment. NASDAQ’s blow-up and the Argentinean crisis, one after the other, lost us contracts, gave us an empty pipeline and produced sad faces all over. We quickly realized that with a very unstable economy, a non-existent VC industry, and a small local market, we were probably born in the wrong country.
“Being forced to lay off good, committed people was without a doubt the worst feeling I’ve ever experienced at Technisys. I had never done layoffs before, except for an isolated person with a bad attitude or a non-performer. Here I was laying off 20% or more of our people, even though they had good attitudes and good performance records. That was really tough. At first some of those who remained felt some guilt about being kept or felt insecure, worrying ‘am I next?’ But luckily we had some good events that helped rebuild the morale, including being able to hire back some of those we had previously let go. “At some points in 2002 and 2003, we nearly ended the game. But then we saw that we had a good product, some good customers and some good employees, so we decided to continue on.”
What are the key lessons about entrepreneurship and successful growth strategies you’ve taken from your company experience?
1. “Think big. You will use all of your time, so it had better be worth the effort.
2. Go for a big market. That way, there are no natural limits to your company’s growth.
3. People are so important. Take your time to select your partners, investors and employees.
4. Build a scalable business model from the very beginning. Processes, processes and more processes.
5. Commit to your clients. Commit to their businesses, and establish
long-term relationships. If you can help them once, they will buy again.”